Disability Insurance 101

At any time in your life, you could suffer an injury or develop a medical condition that jeopardizes your ability to earn a living. This type of unexpected life event would have a devastating impact on your career and income. Medical professionals possess a unique risk for this type of situation, especially those who perform surgical procedures or have interventional duties. From a financial perspective, as a medical professional, you must view yourself as having the capacity to earn millions of dollars over your working lifetime. One way to help protect yourself and your income potential is with an individual disability insurance policy. This type of policy can provide you with a steady flow of income in the event of a disabling injury or illness. These plans are both customizable and portable and can provide a safety net that allows you to retain your quality of life as you manage your condition. Our team could help you understand the basic principles of disability insurance.

What Benefits Does Disability Insurance Provide?

Each disability insurance company possesses something called an issue and participation limit. This means that the company dictates to you how much of your income can be protected. Typically, if you are in training, they will provide an annual tax-free benefit of $60,000 regardless of your income. When you are finished, the amount of benefit will be directly tied to the amount of income you earn. As of 2021, the most a physician can implement with domestic disability insurance companies is $360,000 of annual tax-free benefits. Not only is the annual benefit that you will receive an important aspect of your policy, but how long you receive it. The benefit period that you get to choose from is to the age of 65, to the age of 67, or to the age of 70. One disability insurance company offers a lifetime benefit rider or a lump sum rider. Either of these riders would provide additional benefits over and above the typical benefit period.

When Does a Policy Holder Become Eligible?

Every individual disability insurance policy revolves around your inability to work. The reason for your disability will not affect whether the policy will provide benefits. This is why the definition of disability is so important within your contract. It will not state specific reasons that you cannot work, only that you are unable to perform the material and substantial duties of your occupation.

As part of your contract, you will choose your elimination period which states how long you will wait before you receive your first check after a claim is approved. You can look at the elimination period like a deductible. You can choose between 30, 60, 90, 180, and 365 days. Your monthly premium is higher for a shorter elimination period.

Many policies can provide benefits in case of a partial disability if you have chosen to include a partial or residual rider on your specific policy. If you find that you can return to work but your income has suffered at least a drop of either 15 or 20% of gross income, you then can collect benefits. The circumstances under which you become eligible to collect benefits depend on the specific language in your contract. Our team could help you choose a plan that is right for you.

Get in Touch to Discuss the Basic Principles of Disability Insurance for Residents and Fellows

The top disability insurance carriers in the United States offer monthly benefits of either $5,000 during training or $6,500 or $7,500 in your graduating year. It is important to capitalize on your youth and health and try to secure an individual policy while you are in training. Currently, there is no need for a blood or urine test so medical underwriting has become that much easier (Berkshire is not the only major disability carrier to offer this). In addition, most of the companies offer some sort of resident discount while you are in training.

In addition, the monthly benefits that are offered for you during training are normally not sufficient when you become an attending so you would want to maximize a future increase option rider. This gives you the ability to increase your protection in the future with no medical underwriting. You would only need to provide financial documentation and the amount of group long-term disability insurance you possess.

This is the optimal time to implement an individual disability policy, while you are healthy, and to maximize the discount you would receive. Contact us today and allow us to walk you through this 101 guide to disability insurance.